Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2017 Earnings Presentation
42 slides from Life Healthcare's earnings presentation, May 2017
Slide 1: Interim Results and Distribution
Interim Results and Distribution for the six month period ended 31 March 2017 Life Health Care Well-being and quality Clinical excellence in world-class Quality, service, respect of life facilities and empathy for those entrusted to our care OUR MISSION IS TO IMPROVE THE LIVES OF PEOPLE THROUGH THE
Slide 2: Introduction
INTRODUCTION ANDRÉ MEYER GROUP CEO 2
Slide 3: Life Healthcare Business Overview
Life Healthcare Business Overview Our vision: To be a market-leading, international, diversified healthcare provider SA UK India Europe ✓ 50 facilities ✓ 12 facilities ✓ 12 cardiac units Acute hospitals ✓ 8 067 beds ✓ 2 325 beds ✓ 624 beds ✓ 7 acute rehab facilities (319 beds) Complementary ✓ 8 ment
Slide 4: Acquisition of Alliance Medical Group Limited
Acquisition of Alliance Medical Group Limited Transaction overview • Life Healthcare acquired approximately 94% of Alliance Medical Group Limited (Alliance Medical) with management acquiring the balance of the shareholding • Enterprise value of R14.3 billion (including full contingent consideration)
Slide 5: Life Healthcare's strategic acquisition objectives
Life Healthcare’s strategic acquisition objectives Life’s objectives What Alliance Medical offers Enter markets and market segments with higher Strong underlying demand driven by demographics, growth opportunities disease burden and advances in medical technology and an increasing focus on early dia
Slide 6: Benefits of combination
Benefits of combination Benefits What Alliance Medical offers Accelerates Life’s geographic diversification • Increase in revenue and EBITDA outside of southern Africa • Alliance Medical operates in 10 European countries Positions Life firmly in diagnostics • A strategically important market with hi
Slide 7: Financial overview
Financial overview Group Revenue EBITDA Normalised EPS • +22.6% • +15.2% • -35.7% • R9.6 billion • R2.4 billion • 56 cents Revenue EBITDA Complementary revenue vs acute/other 21% 18% 20% 79% 82% 80% SA International SA International Complementary Other September 2016 split 30 September 2016 split 30
Slide 8: Operational Review
OPERATIONAL REVIEW ANDRÉ MEYER GROUP CEO GUY BLOMFIELD ALLIANCE MEDICAL CEO 8
Slide 9: Operational review: Southern Africa
Operational review Southern Africa 31 Mar 31 Mar Change 2017 2016 % PPD growth -1.0% +2.7% Revenue R7 627m R7 288m 4.7 Normalised EBITDA R1 981m R2 022m (2.0) Normalised EBITDA margin 26.0% 27.7% • Revenue per PPD: + 6.3% - Tariff increase: + 6.1% - Case mix impact: + 0.2% • Pressure on acute hospit
Slide 10: Operational review: Southern Africa revenue
Operational review Southern Africa Revenue* (Rm) Total CAGR: 8.1% • Strong growth in complementary services Complementary CAGR: 18.1% revenue (+22.7%) 8 000 405 • Driven by additional mental health beds and 330 292 strong demand in acute rehabilitation, renal 7 000 399 446 dialysis and oncology 252
Slide 11: Operational review: bed growth and occupancy
Operational review Southern Africa H1 • Life Flora Bed growth 2017 • Life Kingsbury Capacity expansion at existing facilities 22 • Life Claremont Mental health 60 Ophthalmology Total beds 82 • Life Carstenview Renal dialysis stations 11 Occupancy (%) Medical/surgical mix 80 76.1 H1 H1 74.4 2017 2016
Slide 12: Operational review: quality outcomes
Operational review Southern Africa 31 Mar 31 Mar Quality outcome 2017 2016 Standard Recommend 69.4% 68.7% Patient experience 83.0% 80.6% Patient incident rate 2.83 2.69 Per 1 000 PPDs HAI (Healthcare associated infection) 0.49 0.35 Per 1 000 PPDs VAP (Ventilator associated pneumonia) 1.76 1.72 Per 1
Slide 13: Operational review: Healthcare services
Operational review Southern Africa 31 Mar 31 Mar Change Healthcare services 2017 2016 % Revenue 399 446 (10.5) EBITDA 59 75 (21.3) EBITDA margin 14.8% 16.8% • Life Esidimeni: - Business impacted by the non-renewal of 1 570 mental health beds as of 30 June 2016 by the Gauteng Department of Health - A
Slide 14: Southern Africa: Sustainability
Southern Africa: Sustainability Competition Commission Healthcare Market Inquiry (HMI) • Continued extensive engagement with the HMI − Ongoing engagement and input regarding: › the HMI profitability analysis › the nature of our relationships with our supporting specialists − Various third-party prov
Slide 15: Operational review: Poland Scanmed
Operational review Poland: Scanmed 31 Mar 31 Mar Change 2017 2016 % Beds 624 617 Cardiac units 12 12 Medical facilities 40 43 Revenue R530m R572m (7.3) Normalised EBITDA R27m R77m (64.9) Normalised EBITDA margin 5.1% 13.5% • Decline in revenue due to the reduction in cardiology tariffs which made up
Slide 16: Operational review: India Max Healthcare
Operational review India: Max Healthcare 31 Mar 31 Mar Change 2017 2016 % Beds 2 325 2 220 Occupancy 69.4% 69.6% Revenue (Rs Crore) 1 206 1 105 9.1 Normalised EBITDA (Rs Crore) 141 117 20.5 Normalised EBITDA margin 11.7% 10.6% • Good revenue growth driven by growth in the phase 2 & 3 hospitals • EBI
Slide 17: Operational review: India Max Healthcare by phase
Operational review India: Max Healthcare 2017 2016 Change 2017 2016 Change Rev Rs Cr Rev Rs Cr % EBITDA Rs Cr EBITDA Rs Cr % Phase 1 hospitals 683 689 (0.9) 94 92 2.2 Phase 2 hospitals 302 274 10.2 21 12 75 Phase 3 hospitals (Vaishali and Smart) 221 142 55.6 26 13 100 Total net revenue 1 206 1 105 9
Slide 18: Alliance Medical: Geographic split
Business review Alliance Medical: Geographic split UK Italy Ireland Other geographies Spain Netherlands Germany Territorial coverage Finland Bulgaria DI static sites: 37 Owned clinics: 13 Operating sites: 19 PET-CT national Static sites: 22 France contract sites: 31 Mobiles: 45 Norway • MRI • MRI •
Slide 19: Alliance Medical: Diagnostic imaging business models
Business review Alliance Medical: Diagnostic imaging business models In diagnostic imaging (DI), Alliance Medical has leveraged its international experience to develop a range of business models which provide operational flexibility and are aligned with local market dynamics Number of CT/MRI Setting
Slide 20: Alliance Medical: UK molecular imaging
Business review Alliance Medical: UK molecular imaging PET-CT scans Five-year survival is markedly lower • UK per capita scan rates significantly below other major • UK is targeting the European five-year cancer survivorship European countries rate of 67% by 2020 • Creation of new local capacity wil
Slide 21: Alliance Medical: Fully integrated diagnostics platform
Business review Alliance Medical: Fully integrated diagnostics platform Proven track record or partnering with national health services e.g. NHS England Overview of end-to-end service provision 1 2 3 4 5 6 7 8 9 Equipment Radiotracer Contract Interim Radiography Staffing, Facility provision Contract
Slide 22: Alliance Medical: Market-leading player
Business review Alliance Medical: Market-leading player A market leader in Increasing Europe focus on Focus on out-of-hospital quality and community collaboration settings Broad Strong national growth footprint potential in core markets Long-term Integrated partner platform with healthcare Operation
Slide 23: Operational review: Alliance Medical
Operational review Alliance Medical 31 Mar 31 Mar Change For 6 months 2017 2016 % Revenue (£’m) 124.0 118.1 5.0 EBITDA (£’m) 34.3 31.9 7.5 EBITDA margin 27.7% 27.0% EBIT (excluding amortisation) (£’m) 21.4 21.1 1.4 EBIT margin (excluding amortisation) 17.3% 17.9% • Revenue over the six months grew b
Slide 24: Financial Review
FINANCIAL REVIEW PIETER VAN DER WESTHUIZEN GROUP CFO 24
Slide 25: Highlights
Highlights REVENUE NORMALISED EBITDA NORMALISED +22.6% +15.2% EPS to R9.6 billion to R2.4 billion -35.7% 56.0 cents ACQUISITION OF ALLIANCE MEDICAL INTERIM DIVIDEND ENTERPRISE VALUE 35 cents R14.3 billion (R504 million) (including contingent consideration payable) 25
Slide 26: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change R’m R’m % Revenue 9 638 7 860 22.6 Southern Africa 7 627 7 288 4.7 Alliance Medical 1 481 - Poland 530 572 (7.3) Normalised EBITDA 2 418 2 099 15.2 Southern Africa 1 981 2 022 (2.0) Alliance Medical 410 - Poland 27 77 (64.9) Normalised EBITDA ma
Slide 27: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change R’m R’m % Revenue 9 638 7 860 22.6 Normalised EBITDA 2 418 2 099 15.2 Normalised EBITDA margin 25.1% 26.7% Operating profit: 1 790 1 779 0.6 Southern Africa 1 663 1 742 (4.5) Alliance Medical 141 - Poland (14) 37 >(100) EBIT before amortisation:
Slide 28: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change R’m R’m % Revenue 9 638 7 860 22.6 Normalised EBITDA 2 418 2 099 15.2 Normalised EBITDA margin 25.1% 26.7% Operating profit 1 790 1 779 0.6 Associates and joint ventures: (9) (1) >(100) Max Healthcare (12) (7) (71.4) Poland - 2 (100.0) Other 3 4
Slide 29: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change R’m R’m % Revenue 9 638 7 860 22.6 Normalised EBITDA 2 418 2 099 15.2 Normalised EBITDA margin 25.1% 26.7% Operating profit 1 790 1 779 0.6 Associates and joint ventures (9) (1) >100 Attributable profit: 144 965 (85.1) Southern Africa 1 020 1 00
Slide 30: Financial results: Segmental review
Financial results Group: Segmental review 31 Mar 2017 31 Mar 2016 Change R’m R’m % Revenue 9 638 7 860 22.6 Southern Africa Hospitals and complementary services 7 228 6 842 5.6 Healthcare services 399 446 (10.5) Poland Healthcare services 530 572 (7.3) Alliance Medical Diagnostic services 1 481 - EB
Slide 31: Acquisition of Alliance Medical: Transaction overview
Acquisition of Alliance Medical Transaction overview • Life Healthcare acquired approximately 94% of Alliance Medical effective 21 November 2016 − Initial cash consideration: £553 million − Estimated deferred cash consideration: £21 million − Assumed debt: £167 million − Management equity: £33 milli
Slide 32: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change cents cents % EPS 13.7 93.0 (85.3) Impairment of investment 13.5 - Profit on disposal of PPE (0.5) - HEPS 26.7 93.0 (71.3) Contingent consideration released - (6.4) Transaction costs 24.1 - Other 5.2 0.5 Normalised EPS 56.0 87.1 (35.7) 32
Slide 33: Financial results
Financial results Group 31 Mar 2017 31 Mar 2016 Change cents cents % Normalised EPS 56.0 87.1 (35.7) Southern Africa 96.7 97.3 (0.6) Poland and India (2.9) 1.3 >(100) Alliance Medical 10.8 - Funding costs for international acquisitions (48.6) (11.5) >100 33
Slide 34: Consolidated condensed statement of financial position
Consolidated condensed statement of financial position 31 Mar 2017 30 Sept 2016 R’m R’m Non-current assets 28 912 14 395 PPE 10 002 7 752 Goodwill 11 326 2 288 Intangibles 3 986 908 Investment in Max Healthcare 2 535 2 546 Other 1 063 901 Current assets (excluding cash) 4 411 2 498 Cash 1 430 604 To
Slide 35: Debt
Debt 31 Mar 2017 Weighted avg. 30 Sep 2016 Weighted avg. Funding R’m cost of debt R’m cost of debt (post-tax) (post-tax) Acquisition funding ZAR 13 524 8.13 2 951 6.67 PLN 735 3.77 773 3.76 GBP 981 1.61 - - Capex funding - ZAR 2 204 6.66 1 925 6.06 Poland 156 3.06 181 3.05 Alliance Medical 2 867 1.3
Slide 36: Debt position post rights offer
Debt Debt position post rights offer Rm 25 000 1 509 20 000 2 867 156 2 204 15 000 1 509 10 000 2 867 156 15 240 2 204 951 181 5 000 1 925 6 460 3 724 0 Sep-16 Mar-17 Post rights offer Acquisition funding Capex Poland AMG IFRS Net debt to EBITDA 1.67x 3.99x ≈ 2.35x 36
Slide 37: Distribution
Distribution Cents/ • Declared an interim dividend of 35 cps Distributions share R’m • Scrip distribution alternative Interim 2016 73 765 • Shareholders entitled to receive all or part of their Final 2016 92 973 distribution in cash or in shares Total 2016 165 1 738 • Scrip distribution done at a In
Slide 38: Outlook
OUTLOOK ANDRÉ MEYER GROUP CEO 38
Slide 39: 2017 Outlook: Southern Africa
2017 Outlook Southern Africa Total Total Total Category H1 H2 2017 Acute facility: Capacity expansion at existing facilities 22 100 122 Mental health/acute rehabilitation: New facilities 60 - 60 Mental health/acute rehabilitation: Capacity expansion - 22 22 Total 82 122 204 Renal dialysis stations 1
Slide 40: 2017 Outlook: International, Alliance Medical
2017 Outlook International Alliance Medical: • UK: − Continued growth of underlying diagnostic demand − Roll-out of the PET-CT programme − Investment in expanding radio-pharmaceutical production at two UK sites will result in the doubling of capacity within +- 30 months − Start rolling out the Commu
Slide 41: 2017 Outlook: Poland and India
2017 Outlook International Poland (Scanmed): • Focus on improving efficiencies and cutting costs • Position the business to benefit from the new NFZ contracts and tenders • Increasing the percentage of business from non-government work India (Max Healthcare): • Optimising the current network through
Slide 42: Thank You
THANK YOU 42
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